Economy likely accelerated in Q3
Credit to Author: Anna Leah E. Gonzales| Date: Sun, 03 Nov 2019 16:44:19 +0000
Philippine economic growth is projected to recover in the third quarter of the year on the back of higher consumer and government spending, analysts polled by The Manila Times said.
Estimates for July to September ranged from 5.7 percent to 6.3 percent with a 6.0-percent average, an acceleration from the 5.5 percent expansion recorded in the second quarter of the year.
It was, however, the same as the 6.0-percent gross domestic product (GDP) growth in the third quarter of 2018.
Official third quarter GDP growth data will be announced by the Philippine Statistics Authority (PSA) on November 7.
Analysts from ING Bank Manila and Rizal Commercial Banking Corp. projected the Philippine economy to grow by 6.3 percent during the period.
“After hitting a speed bump in 1H (first half) due to ‘domestic handicaps,’ we expect growth to rebound to 6.3 percent in the 3Q (third quarter) with base effects helping bolster this case,” said ING Bank Manila Senior Economist Nicholas Antonio Mapa.
“On the expenditure side, we forecast household final consumption to deliver a sizeable contribution to growth, due largely to the fact that inflation has plunged to less than 1 percent in September, which should help entice an accelerated pace of holiday spending,” he added.
He said capital formation, which declined by 8.5 percent in the third quarter, may start to recover following the central bank’s move to reverse last year’s tightening cycle while exports also managed to grow for five consecutive months despite global headwinds.
“All in all, a herculean effort from household spending accompanied by revitalized government outlays will more than make up for tepid capital formation numbers in 3Q to lift growth to 6.3 percent,” said Mapa.
RCBC Economics and Industry Research Division head Michael Ricafort, also said the acceleration in growth will be “brought about by the dramatic increase in government spending (39 percent increase in September) especially on infrastructure, as the government’s catch-up spending for the rest of 2019 finally taking place and already breaking away from the lingering slowdown in government spending.”
Ricafort said inflation, which dropped to 0.9 percent in September, decline in local interest rates could also help fuel consumer spending and increased demand in loans, thus leading to greater economic activities and faster GDP growth.
“Continued growth in OFW (overseas Filipino workers) remittances, BPO (business process outsourcing) revenues, foreign tourism receipts, POGO (Philippine offshore gaming operators) revenues, and continued inflows of foreign investments also partly support consumer incomes and spending power,” he said.
Ricafort said the Philippine economy would likely continue to pick up for the rest of the year, growing by at least 6 percent in the fourth quarter supported by the growth in government spending.
He said, however, that risks to growth include any delay in the approval of the 2020 national budget, slower agricultural output from falling palay (unmilled rice) prices, the African swine fever that could reduce livestock output, uncertainties on the proposed rationalization of fiscal incentives, possible partial or total ban on POGOs, and the slower global economic growth largely from the lingering US-China trade war that could weigh on exports or global trade, manufacturing output, foreign investments, OFW remittances, and foreign tourism.
“Other external risk factors to local economic growth include any volatility in global crude oil prices brought about by tensions related to Iran and in other oil-producing countries in the Middle East, Brexit-related uncertainties, risk of recession in Europe, contraction in manufacturing gauges in some developed countries, slowest economic growth in China since 1992, and risk of recession in Hong Kong,” Ricafort said.
An analyst from Capital Economics meanwhile, said that the economy likely grew by 6.2 percent.
“We are pencilling in growth of 6.2 percent year-on-year this quarter, mainly due to a rebound in government spending,” said Capital Economics Economist for Asia Alex Holmes.
Victor Abola, an economist from the University of Asia and the Pacific, forecasts a 6.0-percent growth also from the recovery in government spending, low inflation, and strong consumer spending.
AMZ Research, in a report, said Philippine economic growth likely settled at 5.8 percent.
“Indicators such as passenger vehicle sales and consumer imports suggest that private consumption likely remained steady, supported by low inflation and strong remittances by overseas Filipino workers,” said ANZ Research.
An analyst from Regina Capital, meanwhile, offered a projection of 5.8 percent from low inflation and narrower trade balance.
“There may be some shocks felt with the sudden spike of oil, albeit temporarily during the sudden bombing in Saudi Arabia. Also agricultural output may be affected still by drop in rice prices,” said Regina Capital Head of Sales Luis Limlingan.
An economist from the Ateneo de Manila University’s Center for Economic Research and Development gave the lowest projection of 5.7 percent.
“We expect some push from extending government spending. However, we still see lower investment growth due to the global and local environments,” said Alvin Ang, director of the Department of Economics in Ateneo.